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Thursday, November 30, 2017

Daily update 11/30 Bitcoin

Today we had a buying panic followed by some profit taking.

Look at that volume.  Plenty of participation.  This looks a lot like a possible buying climax like we had back on March first.  That one led to a pullback that lasted a few weeks.  Breadth was only +54% after being +65% at the high.  There was considerable profit taking in the afternoon.  New highs were strong again at 285.  New lows dropped considerably to 31, but that is still elevated.  Asia was mixed overnight while Europe was up.  That had buyers already pushing the futures to a new high going into the open.  The bulls really came out when news hit that McCain would vote for the tax bill.  The market peaked shortly before 1 PM and the sellers took over the rest of the day.

We have not seen a long upper tail like that on the futures since the early Aug. pullback.  The futures are still outside the channel in accelerated up move mode.  I don't know if there is more up right away or not.

The green count picked up a bit and is getting pretty close to overbought. 

HYG rebounded from the spike down low, but is still below its 200 SMA.  I am not sure if this is out of the woods or not. 

Investors seemed focused only on tax cuts at the moment.  I still have no idea whether there is enough support to pass the bill in the senate.  I also have no idea what schedule it is on. 

European indexes ended up closing mostly in the red.  Most Asian indexes were red except Japan.  It is certainly not clear the global de-risking is over.  Seeing some comments coming out of China there may be really good reasons for it.  This morning looked a lot like euphoria to me.  They interviewed Icahn by phone about some stock he bought to become an activist investor in and he mentioned the market looked euphoric to him as well.  Unfortunately there is no way to measure euphoria.  It is simply an opinion.  In my opinion we have a sentiment condition consistent with a bull market top.  Of course that can last for months before the final price high.  I expect the trouble that takes the market down to come from offshore most likely originating in China.  I think we need to keep a close eye on Asian markets.  The horrific hurricane season will likely keep the U.S. economic data looking good for a while yet.  I can't be sure that will insulate us from the global economy should China stumble badly though.  China slowing down seems highly likely to me.  It is just a question of how much. 

A close below today's low (2633) most likely signals this was a buying climax and could usher in some corrective activity.

It is interesting listening to people talk about bitcoin.  I have heard people call it a commodity.  Since a bitcoin does not actually physically exist it is not a commodity.  I have heard people call it a store of value.  Really.  Something that goes up and down in price 10-20% in a day is not a store of value.  Some call it a currency that will be the future.  Calling it a currency has the same problem as calling it a store of value.  Nobody is going to accept payment in something that varies in value the way bitcoin does.  There is also something else.  Blockchain technology is supposed to be this great new invention.  I don't really get the excitement.  Blockchain is nothing more then what I studied in college back in the 80s as a distributed database.  People get excited about the fact this makes it decentralized and under no single entity's control.  The problem with it is this is an extremely inefficient architecture.  I will predict right now that nothing could ever be used as a real currency based on this technology as any serious amount of transactions would bog the system down to be unusable.  Bitcoin already experiences issues in that regard and people are only trading it.  They are not actually buying lots of stuff with it.  A single database in a client server architecture was invented for a very good reason.  It is extremely efficient and can easily handle many transactions.  That is something blockchain can never do until we all have supercomputers in our homes and offices connected by fiber optic cables.  Even that might not be enough to make it a usable currency.  I think bitcoin has a better chance of being outlawed (after people lose tons of money on it) then it has of becoming a real useful currency.


Wednesday, November 29, 2017

Daily update 11/29

A very strange day.

An awful lot of volume today to go nowhere.  Breadth was slightly negative.  New highs spiked up to 293.  New lows were up just a bit to 62.  While SPX was spinning its wheels there was a lot of action under the covers.  There was a massive rotation as SOX was -4.39%, QQQ -1.85% , IYT +3.4% and XLF +1.97%.  I am not sure what sparked the selling in the semiconductors or the buying in the transports.  The obvious answer may be SOX has been up big this year and IYT has lagged.  Maybe that was all there was to it.  Sell the winners and buy the laggards.  The financials are supposed to be getting a bid because tax cuts are expected to really help their earnings.

The futures moved up a bit more overnight and even though they turned down during the day they are still outside the upper channel line.

Not much change in the green count.

We have seen a number of rotational days this year.  However, none of them had the magnitude of changes as we saw in SOX and IYT.  This could be a one and done, but that is really hard to say.  Every little dip has been bought very fast since the election.  The dip buyers could rush in to snap up those now discounted semiconductor stocks right away.  Of course before every correction there is always one last high.  We are in the longest period without a 3% pullback ever.  Sooner or later it has to happen.  Maybe this is finally the time.  While rotational days like today have had limited affect on the market over the last year they sometimes signal big changes.  Since we have recently seen some global de-risking it is possible today was important and will have lasting affects.  One day does not make a trend so we will have to wait and see what happens.  As I have said before with so many expecting clear sailing on the upside through year end it would be just like the market to do something else.  If the selling starts up overseas again we could certainly go along for the ride.

The senate voted to debate the tax bill.  I guess the real fun begins now.  News of that debate could cause some intraday volatility.

Here is yet another interesting quote out of China.

China Banking Regulatory Commission representative Yu Xuejun said that the country's economy continues to face large downward pressure despite overly strong stimulus measures. 

Remember the plunging Chinese credit impulse from  Daily update 5/17 Global credit impulse   We may be seeing the affects manifesting in their economy now.

More news of trouble in the Chinese bond market.

Separate reports from China indicate that various companies have cancelled their planned sales of yuan-denominated bonds.


Tuesday, November 28, 2017

Daily update 11/28

Now that was an exciting day.

Europe was up a bit allowing the futures to open up as well.  The market found buyers during Powell's confirmation hearing.  Financials especially liked his comments.  Mid day NK launched a missile sending the futures down 10 points from the high.  Once it was reported the missile hit the water the market promptly rallied back to the high.  Late in the day it was announced the senate tax bill made it out of committee which brought in a fresh round of buyers especially in small caps.  Breadth was +64%.  New highs increased to 206.  New lows also increased to 59 (way elevated).

The futures show the panic buying that ensued after 10 AM today. 

The green count showing some buying enthusiasm today.  Still below overbought levels.

Global markets were mostly positive this morning which allowed the bulls to step in and buy some stocks.  Intraday news helped the result considerably.  I hear talk of a vote in the senate on Thursday for the tax bill.  Obviously a failure to pass will get sold.  More upside I guess if it passes.  The market might pause until that vote after today's explosion.

As long as global markets behave there seems to be an almost complete lack of sellers.  Whether the global selling is over or just taking a pause I cannot say.  That seems to be the only identifiable risk to the market at the moment besides a failure to pass tax cuts.

Monday, November 27, 2017

Daily update 11/27

Friday was up a little as expected.  Today was a lot of nothing outside of a brief sell off mid day.

I believe the sell off was connected to talk of NK doing another missile launch.  The market recovered about half the sell off then went sideways into the close.  Breadth was negative all day despite a little gap up and ended at -60%.  New highs came in at 158.  New lows increased considerably to 44 and remain elevated for new highs.

The futures have been crawling up the upper channel line.  Not much momentum.  They are currently down a couple of points and back inside the channel again.

The green count slipped back below 50, but remains above the red line.  Still not showing a lot of ambition by the bulls.

Market participants lacked enthusiasm to do anything.  Asia and Europe were both down today.  The bond market in China has been throwing fits recently and it seems like it is bleeding over into their stock market now.  The Chinese government seems serious about addressing their problems this time.  Now I understand why they flooded their economy with cash every time things started to go a little haywire the last few years.  They just had their plenum they have every five years in Oct. They wanted to get through that big pow wow without a catastrophe.  With the government set for the next five years it is probably a good time to do the dirty work.  Time will tell.

Besides China the high yield market was causing some angst.  HYG rallied strongly of its 11/15 low, but remains below its 200 DMA.  It also turned down sharply today.  It remains to be seen if it is rolling over though.  It could just be pulling back to make a higher low. 

Everybody seems to be expecting a quiet and bullish end to the year.  Will the market deliver or will China and/or the high yield debt market intervene?  Good question.  Too bad I don't know the answer.


Wednesday, November 22, 2017

Daily update 11/22

A whole lot of nothing.

Another narrow range day.  Breadth was +53%.  New highs dropped down to 176.  New lows were stable at 27. 

The futures made no progress today.  They were above the upper channel line until after the 4 PM close.  They ended the day back inside the channel which is usually followed by a trip to the lower line.  I am not sure that counts this time since they fell back into the channel after the close.  There will probably not be anybody around to sell on Friday anyway unless there is big overnight news tomorrow night.

The green count dipped a bit today.  The bulls are not exactly tripping over themselves to buy here.

I heard on TV today that tech now has a 25% weighting in SPX.  I don't remember what it was back in 2000, but it was probably fairly close to that.  That could cause some re-balancing for anybody that still believes in having a diversified portfolio.  There is so much money in passive investing these days I don't really know how much re-balancing is done anymore.  It is extremely rare for one sector to get such a significant weighting and it never lasts.

Today did not tell us much about future direction.  It could have been the pause that refreshes or the start of a top.  I still can't say whether the global de-risking is over or not.  While Asia was mostly green, Europe was mostly down and Germany was down over 1%.  The day after Thanksgiving is normally quiet with a slight bullish bias.  However, the global situation may change that this year if the sellers return around the world.  I just don't have any idea exactly what is going on with that yet.  I think it is mostly worries about China, but there is not much talk in the U.S. media.  That may be a legitimate worry given some of the comments we have seen from Chinese officials like the one I showed the other day.  I keep hearing things that make me wonder if China is more serious about addressing their imbalances and bad debt then they have been so far.  That could certainly cause some disruption to their economy and hence the world.  I think this is something we need to keep an eye out for.

I won't be doing an update on Friday.  I will see you all back on Monday.  Have a great Thanksgiving for U.S. readers. 


Tuesday, November 21, 2017

Daily update 11/21 SPY open interest data

New highs!

The world felt pretty good overnight and so the market gapped up and ran up until 11 AM.  Breadth was +64% after peeking out at +71%.  New highs expanded to 234.  New lows were stable at 30 and once again are elevated for a new high.

The futures made the upper channel line target today.  They closed above it for 2 bars so far.  It remains to be seen if they can stay out there or come back in tomorrow.  If we go higher tomorrow we are in accelerated up move mode.

The green count hit 50 on the nose.  It was not up all that much considering the price movement in the index.  There is a pretty big negative divergence in the intermediate indicator.  That would only be a problem if the market turns back down.

Over the years I have occasionally got charts from Shaeffer's research showing the open interest for SPY at the next monthly expiration.  An abundance of call options over put options at a particular strike can provide resistance.  If SPY gets through that price level during expiration week it will often accelerate to the upside in what they call delta hedging.  The same hold true for puts.  A big number of puts at a particular strike often is support.  If SPY gets below that during option expiration week it often accelerates down with delta hedging.  I have always found this chart interesting, but I rarely get to see it.  I found that the CBOE site would let me download SPY option data in a text file.  After looking at the data I figured out it was a lot of work to manually get the 20 lines of data I need out of nearly 37000 lines in the file.  Lucky for me I used to be programmer so while the market was doing nothing this afternoon I wrote some code to get the data.  Here is the chart with data as of today. 

This is the Dec. expiration data.  First off there are way more strikes with more calls then puts then I am used to seeing.   Second of all SPY is already well above the 255 strike where the calls and puts balance out.  All strikes above 255 have more calls outstanding.  I don't know how much this data changes between expirations.  I have never seen it twice in front of the same expiration.  I thought we could all learn together on this one.  I will show it every Friday to see what happens.  Right now we have put support at 255.  We have option related resistance from 256 up.  It would not be surprising if we have a pullback between now and that Dec. expiration on the 15th.

We have had two strong days when global markets were also strong and two mixed days when global markets were mixed.  Where does that leave us?   The advance/decline line made a new high today which is supposed to mean nothing too bad will happen if there is a pullback.  That suggests this high should be retested at some point.  Global markets could start going down again and bring out a few sellers. We are in the longest period without a 3% pullback in SPX ever so some pullback would be way overdue anyway.  


Monday, November 20, 2017

Daily update 11/20 China Data Disappoints, As Expected

Small cap strength, big cap nothingness.

I guess the action on Friday was not option related.  SPX found support and resistance today at the same places it did on Friday.  R2000 had another strong day.  Breadth was +57%.  New highs expanded to 156.  New lows were up slightly to 36.  Volume dropped way off.  SPX is still above the 20 SMA.

Overnight the futures dipped below the 20 SMA, but had recovered before the opening bell.  Usually that means they should rally some more.  That did not happen last time though.  The upper channel line target has still not been hit.

The green count picked up a bit more, but remains below 50.  Slowly getting stronger.

The short and intermediate bull pressure lines have come together.  A positive day tomorrow would give them positive crosses.  The long term lines remain positive.

NYSE ticks started acting funny on 10/25.  That was when weakness in HYG and small cap stocks started to become apparent.  HYG bounced strongly last Thursdays as did stocks and since that time the ticks have reverted to normal behavior.  Short term internals have returned to a positive backdrop which should lead to further upside.  However, I can't really be sure the global de-risking is truly over.  Global markets have been mixed the last two days after the strong bounce on Thursday.  We could be experiencing an oversold bounce.  While the U.S. bounce looks like it should continue it could get short circuited if global selling resumes. 

Short article from ECRI patting themselves on the back on predicting a slowdown in China.  China Data Disappoints, As Expected

Fixed asset investment is growing at the slowest rate in the entire data series.  The last stock market fit was in late 2015 and early 2016 when that investment growth was taking a dive and worries about China hit stocks.  The current global selling we are seeing could be due to similar worries.  This is not the only data out of China that is showing a bit of economic weakness.


Friday, November 17, 2017

Daily update 11/17 The Flames Went Higher

Gap down, stay down.  Possibly option expiration related.  Maybe the rally continues on Monday.

After a starting gap down the market stayed in a fairly narrow trading range.  Breadth was strong at +60%.  Small caps were strong all day.  Big caps were taking a break.  New highs were 102.  New lows dropped down to 26.  SPX held above the 20 SMA.

The futures held above the 20 SMA until after the close.  They still have not hit the upper channel line target. 

The green count rose a bit more today, but remains below 50.

I think today might have been about option expiration.  We will see if the bulls come back on Monday.  Europe was down while Asia was mostly up.  There was some volatility in one China index.  Japan was up a good bit early on, but surrendered a lot of the gains by the close.  I don't see any clear signs this global de-risking thing is over yet.  If the sellers come back next week I don't know if the U.S. dip buyers will be as anxious to load up.  I have questions with no answers at the moment.

I don't generally talk about the infamous Hindenburg omens because they happen a lot more then the big moves down they are supposed to predict.  However, this chart caught my eye.  The Flames Went Higher

Notice the red line crossing above 20 has led to corrective activity as in 2015 or full bear markets as in 2000 and 2007.  Only 2007 was higher then what we have now.  It looks like SPX does not seem to go much higher after crossing 20 even though the downside is not necessarily immediate. Will it be different this time?  The sample size is rather small, but still this could be significant.

Have a great weekend.


Thursday, November 16, 2017

Daily update 11/16

Global bounce.

SPX has closed above 2590 three times.  Today it hit 2590 and back off a bit.  Breadth was +71%.  New highs expanded a bit to 115.  New lows dropped down considerably to 41.  Volume was slightly less then yesterday.  Not a big deal, but it would have been more comforting to see a volume increase.

At least we got the bounce the futures indicated we should get.  There is still room up to the upper channel line.  What happens if/when we get there is unknown.

The green count picked up nicely with the bounce, but remains below 50.  Still looking indecisive, but we will see what develops.

Both IWM and HYG had nice bounces today, but are below their 200 DMAs.  The VIX was down 10% today, but did not melt down in the same fashion as it usually does on a day like this.  This could mean there is plenty more room for the market to run before the VIX gets "low" again.  On the other hand, there is often a VIX divergence similar to this at important tops.  With all the negative divergences around it is possible it is the latter.  What happens on this retest of the high could very well be dictated by what goes on in the world.  U.S. investors clearly do not want to sell with the promise of tax cuts next year.  That makes perfect sense.  However, foreign investors do not have the same situation.  If global de-risking returns they make take our market down enough to force some people to sell.  I have no idea how to even begin to handicap that scenario.  Maybe the last few days of global selling is all there is and it is off to the races again.  I don't have the data to be able to really analyze foreign markets.  Near as I can tell there are some worries about China again.  From Zhou Xiaochuan, the governor of China’s central bank:
"China’s financial sector is and will be in a period with high risks that are easily triggered. Under  pressure from multiple factors at home and abroad, the risks are multiple, broad, hidden, complex, sudden, contagious, and hazardous. The structural unbalance is salient; law-breaking and disorders are rampant; latent risks are accumulating; [and the financial system’s] vulnerability is obviously increasing. [China] should prevent both the “black swan” events and  the “gray rhino” risks."

If Yellen said something like that the U.S. stock market would probably outright crash.  I wonder how many people in China actually saw those comments though.  I am sure their media is a bit different then ours.  The way China added debt since 2008 I have been expecting a serious problem over there at some point.  The only question in my mind is when.  In Daily update 5/17 Global credit impulse I showed some charts showing the potential for credit problems in China.  The time may be soon.  I can't really say.  It is certainly a risk though.

With this bounce a close back below SPX 2566 again might bring out more sellers then last time.  With SPX just a few points away from the high a test seems likely.  Whether there will be sellers lurking there I cannot say.


Wednesday, November 15, 2017

Daily update 11/15

Global de-risking continued again.

SPX closed below the key 2566 level, but.  I will get to the but in a little bit.  Breadth was -62%/  New highs contracted to 78.  New lows were higher once again to 142.  SPX closed below the 20 SMA for the first time since late Aug.  That is an unusually long time.  No confirmation of a break yet.

The futures closed below the lower channel line this morning, but came right back in and closed back above it.  That usually means a trip to the upper channel line is likely.

The red count crossed over the green line, but is still below 50.

In Daily update 11/13 I wrote " I am still watching that 11/9 2566 low as a possible tipping point should SPX close below that.  What we might tip into should that occur is unknown."  Well we finally closed below that level, but there are extenuating circumstances.  When SPX fell below 2566 right after the open instead of bringing out sellers it brought out dip buyers.  Only a late days sell off took it back below.  Those late day moves are not particularly reliable for future direction.  The NYSE ticks spent most of the day in positive territory today for the first time in this little pullback.  Dip buyers were more enthusiastic.  On top of that HYG sold off, but reversed to close slightly positive.  A lot of the time the first close below the 20 DMA in a long time is bought.  Will this be one of those times?  It does not look like U.S. investors got the memo the rest of the world got about taking some money off the table.  Unless the market collapses from overnight news tomorrow I think there is a reasonable chance the bulls start a bounce from here to retest the high.  That would be the normal thing for the futures to do based on their action today.  Should the sellers actually decide to show up the 50 DMA (2542) is the next support level down.


Tuesday, November 14, 2017

Daily update 11/14

Wow, four downside gaps in a row.

SPX is still hanging on to the 20 SMA as the dip buyers keeps showing up.  Breadth was -61%.  New highs were stable at 104, but new lows increased sharply to 124.  Not particularly good internals. 

The futures closed below the 50 SMA this morning, but have not confirmed a break yet.  They are down once again as I write this.  If they are still down tomorrow that would be five days in a row.  You have to wonder if the dip buyers will keep showing up.

HYG continued down today and made a new closing low for this pullback.  I still have not heard an explanation of this.  I have heard some people noticing it though.  I don't know if it will bottom in this area or not. 

Global markets have been pulling back ever since the Japan incident.  Not scared type selling.  Just some money coming off the table.  While investors have not been very interested in selling in the U.S. I have to wonder how long that can last if global markets keep falling.  How many downside gaps in a row can we have without the dip buyers losing some confidence?  I guess the lure of tax cuts keeps em coming back for more.  SPX got down to the key 2566 level, but found good support there.  This makes that level doubly important now should it give way.  That might happen if the futures are still down in the morning.  Then again maybe the bulls rush in one more time. 


Monday, November 13, 2017

Daily update 11/13

Dip buyers to the rescue again.

This is the third day in a row the market gapped down, but each day we closed above the open.  The dip buyers have been doing their duty.  Despite the positive close on most indexes breadth was -54%.  New highs were up a bit to 101.  New lows were up a lot to 93.  New lows started running well above where they should be on 10/23.  This type of pattern usually ends up with a pullback at some point.  NYSE ticks are still spending a lot of time in negative territory during the day.  That has been going on since 10/23 about the same time the new lows picked up. 

On 11/9 the futures closed below the 20 SMA for one bar then came right back above it.  I commented at the time that usually means the rally will continue.  The futures gapped down the next day and again today.  While the dip buyers came in to buy those dips the rally still hasn't resumed.  The futures have gotten above the 20 SMA a few times, but have failed to stay there.  The futures do not seem to be doing what they usually do.  This makes me wonder whether the rally will resume or not.  For the moment the futures are stuck between the 20 and 50 SMAs.  We need a confirmed break of one of those MAs to signal the next move.

The green count picked up a bit today.  The bulls are still holding on.

IWM is still hanging on to its 50 SMA.  It isn't clear to me whether it is going to bottom here or not.

Internally the market looks like it wants to have a pullback.  However, SPX and COMPX have been resisting that idea so far.  The elevated volume of late is different then what we have seen in recent years with SPX near its high.  The NYSE ticks are also acting different then they have in a very long time.  There also seems to be some rotation into defensive stocks.  All this suggests the market is not ready to spring higher at this time.  It is possible we are making a top of some significance.  Some markets around the globe are seeing some selling.  Japan is particularly interesting having just made multi decade highs.  The volatility seems to be picking up there.  I have previously mentioned the selling in the high yield market.  There are a number of little things that all seem to signal some caution is warranted for now.  I am still watching that 11/9 2566 low as a possible tipping point should SPX close below that.  What we might tip into should that occur is unknown. 

We have the kind of bullish sentiment seen at prior bull market tops.  I find it interesting how so many articles and people on TV are busy telling me we do not have the conditions normally present at the ends of a bull market.  None of these people have ever spotted a bull market top in real time in their life.  There isn't any particular thing that usually happens at bull market tops.  If there was it would be easy to spot them.  Every top is different.  We are only going to know for sure in hindsight.  I said a few months ago I have the feeling I should be worried about a bull market top forming, but we did not have a technical condition for that.  Since early Oct. the internals have clearly deteriorated.   This may pass and the market may get another shot of adrenaline, but we might be seeing signs of impending trouble.  I am not sure yet.  I think this is a good time to be vigilant and keep abreast of what is happening.


Friday, November 10, 2017

Daily update 11/10 The Distribution of Pain

Asia and Europe were both down which greatly dampened buying enthusiasm in the U.S. today.

SPX tested the 20 SMA and held.  Breadth was -56%.  New highs were 73 while new lows were 55.  Today set a record for the most number of days without a 3% pullback.  Of course that means we are on borrowed time before it happens.

The futures failed to capitalize on yesterday afternoon's bounce.  They still have not confirmed a break below the 20 SMA yet.

The green and red counts came together.  This is where the bulls sometimes come out to play.  I kind of think they need to or the long awaited pullback might finally happen.

Many foreign markets are up more then the U.S. since the election with similar low volatility.  Maybe the temptation to take some profits is starting in with some of those markets.  What little selling pressure we are seeing mostly happens before the European close suggesting that is where it is coming from.  There is plenty of foreign money in our market.  If a global pullback happens we will be affected.  Market internals have been diverging negatively since early Oct.  Unless the market starts another thrust higher those divergences will eventually lead to a pullback.  IWM will need to play along this time.  I read today R2000 had the longest number of days trading within 1% of its 52 week high without making a new high.  It about doubled the prior streak.  I also think HYG needs to show some signs of recovery as well.  It would be helpful if IYT and XLF played along as well.

The senate bill seems to be a completely different animal then the house version.  This was as close as they could come together?  Oh boy.  Republicans feel a lot of pressure to pass tax cuts.  They are seriously worried about what will happen in the next election if they don't.  I can't seem to get the feeling that they will get their act together and pass a good bill.  I worry they will pass something that ends up making the country worse in the long run to try to help with elections in the short run.  I can't see how our big companies with profit margins the highest in history need a tax cut.  Many of those companies have effective tax rates below 25% and quite a few under 20%.  I would like to see them pay more while the small companies with a few employees that end up paying the highest tax rate get a break.  That I am sure will not happen so I probably will not like anything they come up with.  I have felt the rally since Aug. was sparked by the dropping of the health care problem to focus on taxes.  If the squabbling in DC starts up and it really looks like they won't get things done there is some premium in SPX that will come out.  Unfortunately we can't know whether that will happen or not.  I will just say I am not impressed with the republican leadership (full disclosure I have been a registered republican my entire life and a disgruntled one for decades).

This is an interesting article on the division of wealth in this country.  The Distribution of Pain

Have a great weekend.

A special thanks to all those that have served and their families.  While I did not serve I have many family members that have.  I well understand the sacrifices made.  I salute you.


Thursday, November 9, 2017

Daily update 11/9

Interesting day for a change.

SPX gapped down and rallied early on before selling down again, but it was not done.  An afternoon rally made back some of the loss.  SPX penetrated the 20 SMA before the buyers showed up.  Breadth was -61%.  New highs fell all the way down to 71.  New lows came in at 65.  Volume was a little elevated once again after being a little quieter for a couple of days.

At least the futures did what they were supposed to do.  In Daily update 11/7 I wrote "They closed outside of the upper channel line this morning, but came right back in.  That usually means a trip to the lower line."  They penetrated the lower line and bounced right back.  They closed below the 20 SMA this moring, but did not confirm a break.  They actually closed back above it.  That usually means the rally will continue, but not necessarily strong enough to break out above the upper line.

The green count slipped, but remains above the red line.  The bulls still not letting go.

Overnight Japan had a mini flash crash and rally back event.  That seemed to be blamed for Europe selling off.  I never head an excuse for why the Euro was so strong today.  It is possible the Euro had more to do with the European sell off then Japan.  All that set the stage for the down U.S. open.  I think it all combined to provide an excuse for some people to take some chips off the table.  The selling was not particularly violent.  The dip buyers were more then happy to step in and snap up the bargains once again.  At least there was a bit of a discount today. 

The futures suggest the market should continue this afternoon's bounce tomorrow.  However, overnight news could change that of course.  With Europe closing much lower then the U.S. they could easily have their bounce back tomorrow and get the U.S. off to a positive start.  I don't know that we can be assured SPX will make new highs right away.  HYG was down again today.  I heard Art Cashin mention that today and seemed to be slightly concerned about it.  Unlike other instances of HYG tanking that were related to oil this time is unexplained to me so far.  From what I have been able to discern it is not one particular sector.  That of course is a bit more worrisome.  A broad based sell off could be about the economy.  The bond market usually smells out trouble before stocks.  It is too soon to tell anything though.  HYG had a lot of volume today and it is famous for climax bottoms.  The sell off could be over for now.  We will have to see what it does in the next few days.  Should SPX continue down a close below today's low (2566) could usher in more selling and possibly start a long awaited pullback.



The information in this blog is provided for educational purposes only and is not to be construed as investment advice.